Bank stocks fell Friday on light trading volume, as investors continued to cash in gains from the week's rallies and to gird for companies' first-quarter earnings reports.
The KBW Bank Index fell 3.28% but closed up 11.98% for the week, bolstered by last Monday's huge rally after the Treasury Department announced its Public-Private Investment Program, or PPIP, to handle banks' toxic assets. The bank index rose 18.59% that day.
By comparison, Friday's trading was fairly quiet, said Matthew Shields, a trader at FIG Partners LLC. "A lot of people are hesitant to make any significant moves ahead of earnings coming out in a couple of weeks," he said.
Unless the Obama administration or Congress proposes more financial regulations, this week may be similarly calm for bank stocks. Things that could move the market, however, are the host of economic reports due out this week, including the unemployment numbers for March, jobless claims and manufacturing reports.
Richard Bookbinder, the managing member of Bookbinder Capital Management LLC, said that Friday saw short coverings in bank stocks. But most investors just rested, he said.
"They are figuring out what the next step is," he said. "Is the next leg up, or will the market move lower?"
Bookbinder expressed little surprise that bank stocks were not noticeably affected by a meeting between President Obama and several bank CEOs; investors are instead focused on whether the PPIP and other programs will succeed in healing the financial industry, he said.
"All of it hinges upon the rules written for the toxic-asset program and getting the first tranche of it out and seeing how it's going to work," Bookbinder said.
Bank stocks dipped Friday after James Dimon, the CEO of JPMorgan Chase & Co., told CNBC upon leaving the White House meeting that March was "a little tougher" for the New York company than the first two months of the year. The company's stock fell 5.8%.
Other decliners included Bank of America Corp., off 3.2%; Citigroup Inc., down 19 cents, to $2.62; Wells Fargo & Co., 2.3%, and U.S. Bancorp, 5.8%.
Among the regionals, Zions Bancorp. retreated 3.9%, PNC Financial Services Group Inc. 3.6%, SunTrust Banks Inc., 6.6%, Regions Financial Corp., 23 cents, to $4.32, and Fifth Third Bancorp 4 cents, to $2.35. M&T Bank Corp rose 1.4%.
TCF Financial Corp.'s stock fell 8% after Stifel, Nicolaus & Co. analyst Ben Crabtree cut his rating on the Wayzata, Minn., company's stock from "buy" to "hold." Crabtree wrote in his note that he is not changing his earnings estimate or his fair-value estimate of $16 per share for TCF. Instead, he cut the rating because the price bounce in the recent rally makes the company's current valuation less compelling.
"Even though we like the TCF business model and management team and the longer-term outlook for TCF shares, we would want to see a lower price before becoming more constructive on the shares," he wrote.
The broader market also fell Friday as investors took profits. The Dow Jones industrial average fell 1.87%, and the Standard & Poor's 500 index gave up 2.03%.
On Friday, former Federal Reserve chairman Alan Greenspan wrote in a Financial Times opinion piece that it would take massive infusions of public and private capital to get U.S. banks lending significantly again.